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Another day, another upgrade for Meta Platforms Inc.’s stock.
The stock continues to find new fans despite a 127% rally off its November lows.
The latest upgrade comes from KeyBanc Capital Markets analyst Justin Patterson, who cheered the company’s cost cuts as he moved to an overweight rating from his prior sector-weight stance.
“Meta has now narrowed its 2023 operating expense target by another $3B at the midpoint,” Patterson wrote. “Relative to the initial guide for the year, this corresponds to a ~$10B improvement. We believe this underscores that Meta is meaningfully focused on streamlining operations, and that the investment ramp in future years is less intense than we initially feared when management spoke of investment cycles.”
His upgrade comes shortly after Meta
META,
announced plans to cut 10,000 further jobs beyond the 11,000 layoffs it disclosed in the fall.
Patterson is also upbeat about aspects of the Facebook parent company’s advertising outlook, noting “fine” trends in CPMs, or cost per mille, which is the metric used to measure ad pricing.
“We acknowledge that spend is a more important variable than CPM, as ad platforms can toggle between periods of impression and pricing growth,” he wrote, but the “directional change” in CPMs so far this year suggests the company is seeing less severe headwinds from its transition over to the Reels format and recognizing the benefits of artificial-intelligence efforts that play into ad targeting.
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Patterson joins Morgan Stanley’s Brian Nowak, who upgraded Meta’s stock Tuesday morning, and Edward Jones analyst David Heger, who turned bullish on the stock late last week.
Patterson also upgraded shares of DoubleVerify Holdings Inc.
DV,
to overweight from sector weight, writing that the ad-measurement company has been a “model of resilience” with annual revenue growth upwards of 30% since 2019.
“Our view is that companies with product cycles (DV, TTD) and a combination of expense discipline/operational improvement/controversy (META, GOOGL, PINS) stand best positioned to benefit from an eventual recovery,” he wrote.
Patterson noted that he’s now bullish on five of the nine platform and ad-tech stocks in his coverage, when counting Trade Desk Inc.
TTD,
Alphabet Inc.
GOOG,
GOOGL,
and Pinterest Inc.
PINS,
as well.
